Worried about overpaying on house purchase

jimbog

The concern about whether you are overpaying for a house is always there regardless of the state of the market

FTB_property

NinjaTune said:

Echoing earlier sentiments, why would you want the expense (and hassle) of moving again in 2 years?  Legal costs, EA fees, removal expenses and stamp duty will probably wipe out any equity you may have built up.  Unless you are buying a place purely to do it up and sell on for a fat profit then it's crazy imo to buy somewhere for such a short period of time.

Thanks a lot for all your comments. There seem to be theme around that 2 years is too much of a short term plan. This wasn't necessarily what we expected but you have brought up a very valid point for us to consider.

However, there are a number of other aspects to our motivations and decision which is probably a bit too detailed to go into here.

Davesnave

Crashy_Time said:

Davesnave said:

When we bought in the depths of the last recession (2009) it was because of doomsayers suggesting world finance was in a downward plunge from which there was no escape. We figured bricks and mortar were somewhat more substantial than pixels on the screens of various banking web sites.

So, although it wasn't something we loved, we bought something with the potential to be a home for a long time. We're still here and although it's not perfect, our home's fine if the current crisis proves longer term than anyone in the mainstream supposes.

Two years? Pft! Imagine living there for at least 7 years and then decide.

When will you accept that you were wrong on that? Don`t think I have heard of anyone losing money from a bank since 2008, and they were all compensated in full? The problem with a house is that it is illiquid, unlike a bank account or investment account where you can for the most part get at the money when you need it, and IMO suggesting that putting money into a house can substitute for savings/diversified investments is poor financial advice.

I was pointing out that doomsayers have always been around, stirring-up fear. It's OK for you with your 20:20 hindsight, but having money in banks which crashed was extremely unsettling to the ordinary person. It was a novel situation and we were not taking much risk deciding to buy another long term home, as it's what most of us want anyway, particularly at our time of life.

Where did I suggest we bought a house as a substitute for savings, investments, pensions etc? We bought a place within our means and only used savings to develop it later when things were clearer; hence my emphasis on looking at potential for the longer term.We still have savings and some investments, but we all know what many of them are doing at the moment!

Crashy_Time

Davesnave said:

Crashy_Time said:

Davesnave said:

When we bought in the depths of the last recession (2009) it was because of doomsayers suggesting world finance was in a downward plunge from which there was no escape. We figured bricks and mortar were somewhat more substantial than pixels on the screens of various banking web sites.

So, although it wasn't something we loved, we bought something with the potential to be a home for a long time. We're still here and although it's not perfect, our home's fine if the current crisis proves longer term than anyone in the mainstream supposes.

Two years? Pft! Imagine living there for at least 7 years and then decide.

When will you accept that you were wrong on that? Don`t think I have heard of anyone losing money from a bank since 2008, and they were all compensated in full? The problem with a house is that it is illiquid, unlike a bank account or investment account where you can for the most part get at the money when you need it, and IMO suggesting that putting money into a house can substitute for savings/diversified investments is poor financial advice.

I was pointing out that doomsayers have always been around, stirring-up fear. It's OK for you with your 20:20 hindsight, but having money in banks which crashed was extremely unsettling to the ordinary person. It was a novel situation and we were not taking much risk deciding to buy another long term home, as it's what most of us want anyway, particularly at our time of life.

Where did I suggest we bought a house as a substitute for savings, investments, pensions etc? We bought a place within our means and only used savings to develop it later when things were clearer; hence my emphasis on looking at potential for the longer term.We still have savings and some investments, but we all know what many of them are doing at the moment!

My main investment account is returning about 11% at the moment.

This suggested to me that the house was a substitute for savings..... "We figured bricks and mortar were somewhat more substantial than pixels on the screens of various banking web sites."

Crashy_Time

jimbog said:

The concern about whether you are overpaying for a house is always there regardless of the state of the market

I would strongly disagree with that. As the bubble was being blown up many people only cared about securing a house before they were priced out (which of course fitted perfectly with the masterplan to pump lots of secured debt into the economy) and would spend as much as the bank was prepared to give them on a house with no thought about "overpaying". The reversal of that sentiment will be brutal for people who over-leveraged on property.

jimbog

Davesnave said:

Crashy_Time said:

Davesnave said:

When we bought in the depths of the last recession (2009) it was because of doomsayers suggesting world finance was in a downward plunge from which there was no escape. We figured bricks and mortar were somewhat more substantial than pixels on the screens of various banking web sites.

So, although it wasn't something we loved, we bought something with the potential to be a home for a long time. We're still here and although it's not perfect, our home's fine if the current crisis proves longer term than anyone in the mainstream supposes.

Two years? Pft! Imagine living there for at least 7 years and then decide.

When will you accept that you were wrong on that? Don`t think I have heard of anyone losing money from a bank since 2008, and they were all compensated in full? The problem with a house is that it is illiquid, unlike a bank account or investment account where you can for the most part get at the money when you need it, and IMO suggesting that putting money into a house can substitute for savings/diversified investments is poor financial advice.

I was pointing out that doomsayers have always been around, stirring-up fear. It's OK for you with your 20:20 hindsight, but having money in banks which crashed was extremely unsettling to the ordinary person. It was a novel situation and we were not taking much risk deciding to buy another long term home, as it's what most of us want anyway, particularly at our time of life.

Where did I suggest we bought a house as a substitute for savings, investments, pensions etc? We bought a place within our means and only used savings to develop it later when things were clearer; hence my emphasis on looking at potential for the longer term.We still have savings and some investments, but we all know what many of them are doing at the moment!

I concur, primarily a home is a place to live rather than an investment. Those who rely on investments will still need to pay for somewhere to live. Indeed, many reports of people shocked to find their investment accounts frozen back in March, with no warning, and 40% drops in value overnight

Davesnave

FTB_property said:

NinjaTune said:

Echoing earlier sentiments, why would you want the expense (and hassle) of moving again in 2 years?  Legal costs, EA fees, removal expenses and stamp duty will probably wipe out any equity you may have built up.  Unless you are buying a place purely to do it up and sell on for a fat profit then it's crazy imo to buy somewhere for such a short period of time.

However, there are a number of other aspects to our motivations and decision which is probably a bit too detailed to go into here.

  We had a business and interests not possible to sustain while living in a rental, although we were prepared to do it for up to 2 years. Choices are complex. People here won't necessarily appreciate the nuances of individuals' situations.

Davesnave

Crashy_Time said:

Davesnave said:

Crashy_Time said:

Davesnave said:

When we bought in the depths of the last recession (2009) it was because of doomsayers suggesting world finance was in a downward plunge from which there was no escape. We figured bricks and mortar were somewhat more substantial than pixels on the screens of various banking web sites.

So, although it wasn't something we loved, we bought something with the potential to be a home for a long time. We're still here and although it's not perfect, our home's fine if the current crisis proves longer term than anyone in the mainstream supposes.

Two years? Pft! Imagine living there for at least 7 years and then decide.

When will you accept that you were wrong on that? Don`t think I have heard of anyone losing money from a bank since 2008, and they were all compensated in full? The problem with a house is that it is illiquid, unlike a bank account or investment account where you can for the most part get at the money when you need it, and IMO suggesting that putting money into a house can substitute for savings/diversified investments is poor financial advice.

I was pointing out that doomsayers have always been around, stirring-up fear. It's OK for you with your 20:20 hindsight, but having money in banks which crashed was extremely unsettling to the ordinary person. It was a novel situation and we were not taking much risk deciding to buy another long term home, as it's what most of us want anyway, particularly at our time of life.

Where did I suggest we bought a house as a substitute for savings, investments, pensions etc? We bought a place within our means and only used savings to develop it later when things were clearer; hence my emphasis on looking at potential for the longer term.We still have savings and some investments, but we all know what many of them are doing at the moment!

My main investment account is returning about 11% at the moment.

I'm fairly certain a good rate of return either comes via exceptional circumstances or, more often, increased risk.

Why would anyone bother to be a landlord if they could get 11%?

tom9980

Crashy_Time said:

Davesnave said:

Crashy_Time said:

Davesnave said:

When we bought in the depths of the last recession (2009) it was because of doomsayers suggesting world finance was in a downward plunge from which there was no escape. We figured bricks and mortar were somewhat more substantial than pixels on the screens of various banking web sites.

So, although it wasn't something we loved, we bought something with the potential to be a home for a long time. We're still here and although it's not perfect, our home's fine if the current crisis proves longer term than anyone in the mainstream supposes.

Two years? Pft! Imagine living there for at least 7 years and then decide.

When will you accept that you were wrong on that? Don`t think I have heard of anyone losing money from a bank since 2008, and they were all compensated in full? The problem with a house is that it is illiquid, unlike a bank account or investment account where you can for the most part get at the money when you need it, and IMO suggesting that putting money into a house can substitute for savings/diversified investments is poor financial advice.

I was pointing out that doomsayers have always been around, stirring-up fear. It's OK for you with your 20:20 hindsight, but having money in banks which crashed was extremely unsettling to the ordinary person. It was a novel situation and we were not taking much risk deciding to buy another long term home, as it's what most of us want anyway, particularly at our time of life.

Where did I suggest we bought a house as a substitute for savings, investments, pensions etc? We bought a place within our means and only used savings to develop it later when things were clearer; hence my emphasis on looking at potential for the longer term.We still have savings and some investments, but we all know what many of them are doing at the moment!

My main investment account is returning about 11% at the moment.

This suggested to me that the house was a substitute for savings..... "We figured bricks and mortar were somewhat more substantial than pixels on the screens of various banking web sites."

The same money being printed to allegedly prop up the housing market is also pushing up investment prices. I would love to know what period that 11% covers.

Do you remember stock market prices crashed in march and one of your funds was suspended and you were unable to sell your "liquid" assets? 

badger09

Crashy_Time said:

Davesnave said:

Crashy_Time said:

Davesnave said:

When we bought in the depths of the last recession (2009) it was because of doomsayers suggesting world finance was in a downward plunge from which there was no escape. We figured bricks and mortar were somewhat more substantial than pixels on the screens of various banking web sites.

So, although it wasn't something we loved, we bought something with the potential to be a home for a long time. We're still here and although it's not perfect, our home's fine if the current crisis proves longer term than anyone in the mainstream supposes.

Two years? Pft! Imagine living there for at least 7 years and then decide.

When will you accept that you were wrong on that? Don`t think I have heard of anyone losing money from a bank since 2008, and they were all compensated in full? The problem with a house is that it is illiquid, unlike a bank account or investment account where you can for the most part get at the money when you need it, and IMO suggesting that putting money into a house can substitute for savings/diversified investments is poor financial advice.

I was pointing out that doomsayers have always been around, stirring-up fear. It's OK for you with your 20:20 hindsight, but having money in banks which crashed was extremely unsettling to the ordinary person. It was a novel situation and we were not taking much risk deciding to buy another long term home, as it's what most of us want anyway, particularly at our time of life.

Where did I suggest we bought a house as a substitute for savings, investments, pensions etc? We bought a place within our means and only used savings to develop it later when things were clearer; hence my emphasis on looking at potential for the longer term.We still have savings and some investments, but we all know what many of them are doing at the moment!

My main investment account is returning about 11% at the moment.

This suggested to me that the house was a substitute for savings..... "We figured bricks and mortar were somewhat more substantial than pixels on the screens of various banking web sites."

Would you care to clarify that 11%?
Is that per annum? Since 1/1/2020? Total since 1/1/2015? Total since 1/1/2000?  Over what period?
Without context, that figure is meaningless.